Bric group urges swift reform of financial system

(From left) Russia’s President Dmitri Medvedev, Brazil’s President Luiz Inacio Lula da Silva, China’s President Hu Jintao and Indian Prime Minister Manmohan Singh pose for the official photo of the BR

Updated: Fri, Apr 16 2010. 09 33 AM IST

Brasilia: Leading emerging powers called on Thursday for swift reform of international financial institutions to give developing countries a greater voice, saying their group was vital to achieving a new world order.

The call from the increasingly influential Bric countries for more say in global financial institutions such as the World Bank and the International Monetary Fund came ahead of this month’s G-20 finance ministers’ and IMF meetings in Washington.

The leaders of Brazil, Russia, India and China said that voting share reforms at the World Bank to give developing countries more clout should be approved at the IMF meetings.

Setting a specific deadline, the group also said those reforms should be completed by a G-20 summit in November.

“Brazil, Russia, India and China have a fundamental role in creating a new international order that is more just, representative and safe,” Brazilian president Luiz Inacio Lula da Silva said after holding talks with his counterparts.

(From left) Russia’s President Dmitri Medvedev, Brazil’s President Luiz Inacio Lula da Silva, China’s President Hu Jintao and Indian Prime Minister Manmohan Singh pose for the official photo of the BRIC summit at the Itamaraty Palace in Brasilia on Thursday. Eraldo Peres / AP Photo

The group has been pushing for reforms since the global financial crisis of 2008, arguing the current system is unfairly dominated by advanced economies such as the United States, Japan and Europe.

The statement said the group would resist all trade protectionism and look into increasing commerce with one another in local currencies, bypassing the US dollar.

But the group, which has rowed back from talk last year of setting up a new reserve currency, stressed the importance of maintaining the stability of major reserve currencies. As the largest holder of US Treasury bonds, China is not keen to see the value of its investments diminish.

Despite their economic clout and 40% share of the world’s population, differences among the four countries have become more evident since their first summit in Russia last year, exposing the limitations of the group’s ambitions.

“We support a multipolar, equitable, democratic and just world order with the (United Nations) playing a central role in tackling global challenges,” said Indian Prime Minister Manmohan Singh.

The Bric summit, held in Brasilia, was scaled back when Chinese president Hu Jintao decided to go home early to deal with a major earthquake in a remote western region of China.

In one of their few concrete steps toward cooperation, the countries’ national development banks signed an accord enabling them to fund projects in one another’s countries, the Brazilian national development bank’s president said.

Luciano Coutinho, the head of the BNDES, said the agreement covered the infrastructure, energy, sustainability and technology sectors.

China, Brazil Sign Deals

China and Brazil, the largest economies in Asia and Latin America, used the summit to bolster growing ties with trade and investment agreements.

Hu and Lula signed a five-year “action plan” aimed at boosting trade and energy cooperation. The two nations have grown closer in recent years amid a surge in commerce -- in 2009, China became Brazil’s top trade partner.

The projects agreed upon included a $5 billion steel mill at the Acu port in Rio de Janeiro state that would be China’s biggest investment in Latin America’s largest country, home to some of the world’s largest iron ore deposits.

China’s Sinopec and the country’s development bank signed a strategic development agreement with Brazil’s state-run oil giant Petrobras, Sinopec Chairman Su Shulin told Reuters. Su said the deal would cover the development of Brazilian oil resources and trade with China.

Brazil’s recent discovery of vast offshore oil reserves has opened a new area of potential cooperation with resource-hungry China, which agreed last year to lend $10 billion to Petrobras in return for guaranteed oil supply over the next decade.

A Brazilian government source said Lula asked Hu to maintain a dialogue with Iran over its nuclear energy program before the Brazilian leader’s planned visit to Tehran next month. Lula has opposed fresh UN sanctions over Iran’s nuclear program, arguing they will not work.

China, a permanent member of the UN Security Council, has also been reluctant to join Western powers in authorizing new sanctions against Iran.

Hu and Lula did not discuss China’s currency policy, two Brazilian government sources said.

Brazil and the other Brics were not expected to risk fraying ties with China by pressuring it to allow the yuan to strengthen, despite concerns about the effect of cheap Chinese exports on their economies.